Like most students, I borrowed too much money when I was in school and am now starting to pay them back (after consolidating, of course). My loan repayment is $325 a month for 20 years ( a lot, I know). Basically, thats about 53K in principal and 25K in interest.
My question pertains to paying it off early. If I double (or even triple my payments) each month, will the extra money (everything above the required $325) go directly to paying off the principal or am I stuck paying 25K in interest as well (regardless of how quickly I pay the loan off)?
I really want to get this paid off early and I'm thinking if I do so that it would save me quite a bit of money in interest over must paying the minimum and taking 20 years to get it paid off.
2007-08-30 02:53:32 · 4 answers · asked by mm92280 1 in Business & Finance ➔ Personal Finance
Any extra payments would go towards principle. If you doubled up on payments, then this would pay off your loan in about 8 1/2 years.
Keep in mind that student loans usually very low rate that carry tax deductable interest ($25,000 in interest can mean $5,000-$10,000 in savings on your income taxes over the years). If you have other debts (credit cards, car) you may want to consider paying those off first. $53,000 principle paid off over 20 years at $325 a month means your interest rate is about 4.25%. Most credit cards, car loans, and even mortgages carry rates higher than that.
You should also make sure you are putting away a sizeable amount of money for your retirement. Saving early is key to a comfortable retirement. I would not suggest using what could be retirement money to pay off your student loan debt. If you wait 10 years before putting into a 401k or IRA, that can have a huge impact on how much money you will have at retirement. If you have a child, you should put away for their college education (they won't have to be so far in debt when they graduate).
If you have no credit card debt, no car loan, and you are maxing out a 401k or IRA, then by all means, make double and triple payments and get that paid off ASAP.
2007-08-30 03:47:06 · answer #1 · answered by j-man 4 · 0⤊ 0⤋
you are very smart but do not get caught in a catch -22 == sorry forgot you are too young to remember that movie -- if your pay extra it does all go to the amount owe -- but here is the catch -22 if you should get in a bind you will still owe a monthly payment even if for 3 years you have been tripling your payments -- so before you start throwing all you money at the loan start a rainy day fund so you will have some 5-6 months of expense money sat aside in case you get laid off!!!uy tc[er omyou principel eosodaahh t
2007-09-02 14:51:34 · answer #2 · answered by Anonymous · 0⤊ 0⤋
Student loans don't improve credit. For the same reason you can't file bankruptcy and get out of loans.
2016-05-17 06:13:23 · answer #3 · answered by Anonymous · 0⤊ 0⤋
If you pay extra, the extra would go toward principal.
2007-08-30 03:02:31 · answer #4 · answered by Judy 7 · 0⤊ 0⤋